There are a variety of reasons that have led to blockchains seeing increased usage as a platform for electronic commerce. One notable reason that has led many to blockchains is anonymization: the identity of the user behind a blockchain wallet is kept anonymous. There are many cases where an individual or other entity may wish to keep themselves anonymous when making a transaction, such as when purchasing gifts, buying embarrassing products, or merely a desire to keep their purchasing habits private. This has led to a number of individuals utilizing blockchain for e-commerce transactions where both parties are anonymous. In these cases, when a merchant or individual is transacting with another, the only knowledge they may have of the other party to the transaction is an address of their electronic wallet or public key.
While the anonymization may be beneficial for protecting a consumer's identity, it may also be detrimental for largely the same reason. The anonymous nature of traditional blockchain transactions is such that a consumer does not know who they are transacting with, and thus may be transacting with an individual or entity that is less than trustworthy or that may be attempting to take advantage of the consumer. In traditional e-commerce transactions, both parties are often aware of the identity of the other and will typically have several assurances as to the other party's trustworthiness: a consumer knows if a merchant has been around for a time and is still in business, while a merchant knows that if a consumer has authorized access to a transaction account than they can be trusted by that account's issuer. In addition, a payment network and issuing institution often work on behalf of a consumer to protect that consumer against fraud, by verifying identities and by also providing several types of recourse to a consumer if fraud is perpetuated. These measures often involve complex computer processes that are not possible by humans alone, not only because of the speed required, but the complexity of the electronic determinations and the number of form of the input variables. However, for blockchain transactions, there is no knowledge available to either party, and there is often no recourse available in the event that a problem occurs; once the transaction has been processed it is impossible to be reversed and there is no regulatory body that can enforce a payee to pay back the payor in such a distributed ledger system. As a result, each entity in a blockchain transaction has to take the other party at their word, and trust that the other party is representing themselves accurately, or perhaps more accurately accept the risk they are not.
The common ways of electronically assessing the risk of transactions between known parties cannot be translated into an environment where the parties are not known. And of course, for a commercial scale system, the electronic determination representing a measure of risk has to be fast, accurate and reliable, each factor posing a different technological challenge.
Thus, there is a need for a technological solution to provide for a way for two anonymous entities to provide evidence of trustworthiness to one another without compromising the anonymity, particularly with respect to blockchain transactions.